Energy Systems Catapult has released its report, Making Carbon Count: Setting up a new Carbon Regulator, which calls for government to take charge of how carbon emissions are measured and managed across the UK economy.

The report argues that establishing a dedicated Carbon Regulator is key to unlocking innovation and growth by reducing the administrative burden businesses face when reporting on their greenhouse gas emissions. This will improve the credibility of emissions data and help UK businesses remain competitive as they decarbonise their activities.

The Catapult outlines a framework in which a single body with regulatory oversight would set mandatory standards for the growing carbon accounting providers sector. This regulator would develop standardised emissions factors, improve third-party verification of greenhouse gas data, and ensure that misleading carbon claims are addressed. It would work on developing streamlined digital infrastructure to facilitate the smooth exchange of emissions data and would oversee carbon flows across the economy to accurately track UK emissions.

Crucially, it would shift the regulatory landscape for carbon accounting from one which is siloed, complex, and inconsistent, to one which provides clarity for the producers and users of emissions data. A Carbon Regulator would deliver a single point of economy-wide oversight, establish greater consistency in reporting expectations, and coordinate closely with other regulators working in the space to ensure alignment.

The Carbon Regulator would contribute to emissions reductions by enabling government and industry to better evaluate which decarbonisation decisions deliver genuine environmental benefits. By standardising the approach to carbon reporting, the regulator would simplify compliance for businesses and foster an environment where transparent, comparable data supports targeted investments in low carbon technology. In turn, this would help secure the competitiveness of UK industry in a global low carbon market, while promoting sustainable economic growth.

“Our recommendations provide a blueprint for modernising and standardising carbon accounting in the UK,” said Dr Danial Sturge, Practice Manager – Carbon Policy, Energy Systems Catapult. “Establishing a Carbon Regulator will not only simplify reporting requirements but also enable meaningful emissions reductions by supporting innovative approaches to data exchange. This will enable businesses to identify clear opportunities for efficiency improvements and low carbon innovation, ultimately strengthening the economy and positioning the UK as a leader in the transition to Net Zero.”

“Ultimately, innovation-friendly regulatory oversight provides clarity for stakeholders and levels the playing field for the UK’s innovators, cuts investment risks, and builds consumer and business confidence.”

The report recommends embedding these additional responsibilities within an existing regulator: the Financial Reporting Council (which is set to become the Audit, Reporting and Governance Authority, subject to legislation being passed). This body could leverage established expertise in corporate reporting and audit standards and apply it to carbon accounting. By integrating these new responsibilities, the regulator can help ensure that emissions data is both credible and actionable, supporting better decision-making by investors, policymakers and business leaders.

Dr Sturge continued, “The UK is well positioned to lead by example, shepherding the development of a global emissions framework that sets new standards for transparency and accountability.”

Summary of recommendations:

• The Accounting, Reporting and Governance Authority (currently the Financial Reporting Council) should be given the remit of economy-wide Carbon Regulator, as opposed to creating a new body. Given the economy-wide coverage of carbon accounting and its increasing relevance to broader reporting and governance requirements, ARGA will be well-placed to adopt these additional responsibilities.
• The Carbon Regulator should initially focus on carbon accounting firms, to ensure they meet appropriate standards for professionalism and accuracy, and to encourage them to use standardised approaches. This can be supported through the development of professional qualifications for carbon accountants, led by industry bodies and overseen by the Carbon Regulator.
• The approach adopted by in-house carbon reporting functions should be proportionate. Where firms are of a size where mandatory sustainability reporting is required, or in cases where businesses make “carbon neutrality” or similar claims, they should be required to ensure that their carbon reporting meets the same standards as are applied to external providers.
• Over time, the Carbon Regulator will need to develop a consistent approach to mapping emissions across the economy. This will involve developing the use of standardised emissions factors where possible and working with businesses to understand how best to ensure accuracy while reducing administrative burdens they face.
• As international efforts to reduce emissions accelerate, the Carbon Regulator should play a key role in developing agreed solutions. In doing so, the Carbon Regulator can safeguard the competitiveness of UK businesses and ensure that they are well-placed to play their part in the race to Net Zero.

The Carbon Accounting programme is funded by Innovate UK and led by High Value Manufacturing Catapult, in collaboration with Connected Places Catapult, Digital Catapult, Satellite Applications Catapult, and Energy Systems Catapult.

The programme makes the case for a policy and regulatory environment that:

• Supports creating a comprehensive UK framework for greenhouse gas (GHG) emissions, with agreed standards and tools for accounting, tracking, and reporting GHG emissions through supply chains to accelerate industrial decarbonisation.
• Unlocks investment and creates an environment where UK industry excels on the global stage as a destination for low carbon manufacturing.